Many feel that foreign countries tax the rich very heavily and India does not. But did you know that at one time India had to pay 97.50 percent of income tax?
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| Indira Gandhi |
What is the historical tax rate in India
Debates such as distribution of wealth and introduction of inheritance tax have arisen and are currently being discussed in a frenzy. But, in our country, 50 years ago, maximum tax was collected up to 97.50 percent. There was such a period in India.
During Indira Gandhi's tenure as Prime Minister, income tax in India was as high as 97.50 percent. However, this collection came to an end shortly after.
Indira Gandhi saw taxation as an important mechanism to balance income and wealth. Based on this, in February 1970, he presented the budget in Parliament and addressed it.
Social welfare was the theme of the budget. Since the green revolution was taking place, various announcements related to the agriculture sector were included in the budget. A huge sum of money was required to finance it.
Since Indira Gandhi was not a supporter of foreign investment, the taxpaying public had to bear the burden. Subsequently, he announced an increase in taxes on wealth and gifts. 10 percent for those earning a minimum income of 5,000 to 10,000 rupees; He announced that 85 per cent tax will be levied on those earning a maximum of Rs 2 lakh.
So far, 10 percent additional tax has been levied on this category.
Accordingly, the tax rate for persons earning more than Rs 2 lakh has reached 93.50 per cent. Following this, during the last budget of 1973-74, the then Finance Minister Y.P. Chavan raised the additional tax for this category to 15 percent. This took the income tax to a peak of 97.50 percent.
This excessive taxation eventually led to tax evasion. This reduced the tax revenue. An inquiry committee was constituted to look into the matter. In its report, the inquiry panel said that high tax rates were the main cause of tax evasion.
Subsequently, the tax rates were continuously reduced from the next financial year onwards. In the last financial year 1985-86, the maximum tax rate was reduced to 50 percent. The current maximum tax rate of 30 per cent has been in force since the last financial year 1997-98.